UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D 20549
---------------------------
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-5127
----------------------------------
MERCANTILE BANKSHARES CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0898572
------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Hopkins Plaza, Baltimore, Maryland 21201
------------------------------ ------------
(Address of principal executive offices) (Zip code)
(410) 237-5900
--------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X . No .
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
As of July 31, 1995, registrant had outstanding 47,408,226
shares of Common Stock.
PAGE 1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MERCANTILE BANKSHARES CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
JUNE 30, December 31,
(Dollars in thousands, except per share data) 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks............................................................. $ 226,607 $ 257,046
Interest-bearing deposits in other banks............................................ 100 100
Investment securities:
U.S. Treasury and government agencies
Held-to-maturity market value of $1,193,470 (1995) and $1,210,799 (1994)..... 1,195,524 1,251,514
Available-for-sale at fair value.............................................. 230,174 329,552
States and political subdivisions
Held-to-maturity market value of $13,087 (1995) and $13,054 (1994)........... 13,042 13,581
Other investments
Held-to-maturity market value of $7,397 (1995) and $8,833 (1994)............. 6,107 8,183
Available-for-sale at fair value.............................................. 4,082 3,434
------------- -------------
Total investment securities................................................. 1,448,929 1,606,264
------------- -------------
Federal funds sold.................................................................. 37,125
Loans............................................................................... 4,086,722 3,938,095
Less: allowance for loan losses..................................................... (89,547) (91,257)
------------- -------------
Loans, net.................................................................. 3,997,175 3,846,838
------------- -------------
Bank premises and equipment, less accumulated depreciation of $73,893 (1995) and
$72,349 (1994).................................................................... 75,271 74,259
Other real estate owned, net........................................................ 3,015 10,165
Excess cost over equity in affiliated banks, net.................................... 18,297 18,862
Other assets........................................................................ 122,785 124,691
------------- -------------
Total assets................................................................ $5,929,304 $5,938,225
============= =============
LIABILITIES
Deposits:
Noninterest-bearing deposits.................................................... $ 928,473 $ 954,228
Interest-bearing deposits....................................................... 3,959,297 3,811,165
------------- -------------
Total deposits.............................................................. 4,887,770 4,765,393
Short-term borrowings............................................................... 200,785 356,268
Accrued expenses and other liabilities.............................................. 68,693 61,177
Long-term debt...................................................................... 26,011 31,470
------------- -------------
Total liabilities........................................................... 5,183,259 5,214,308
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized 2,000,000 shares; issued and
outstanding None
Common stock, $2 par value; authorized 67,000,000 shares; issued 47,484,997 shares
in 1995 and 48,114,014 shares in 1994............................................. 94,970 96,228
Capital surplus..................................................................... 10,910 22,988
Retained earnings................................................................... 638,271 606,972
Unrealized gains (losses) on securities, net........................................ 1,894 (2,271)
------------- -------------
Total stockholders' equity.................................................. 746,045 723,917
------------- -------------
Total liabilities and stockholders' equity................................ $5,929,304 $5,938,225
============= =============
See notes to consolidated financial statements
</TABLE>
PAGE 2
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
For the 6 Months Ended For the 3 Months Ended
June 30, June 30,
(Dollars in thousands, except per share data) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.............................. $186,428 $147,837 $95,799 $76,291
------------- ------------- ----------------- ------------
Interest and dividends on investment securities:
Taxable interest income............................... 40,162 43,689 19,447 21,624
Tax-exempt interest income............................ 326 360 161 178
Dividends............................................. 223 144 120 92
Other investment income............................... 118 138 56 68
------------- ------------- ----------------- ------------
40,829 44,331 19,784 21,962
------------- ------------- ----------------- ------------
Other interest income................................... 321 276 319 216
------------- ------------- ----------------- ------------
Total interest income............................. 227,578 192,444 115,902 98,469
------------- ------------- ----------------- ------------
INTEREST EXPENSE
Interest on deposits.................................... 77,250 60,372 40,388 30,518
Interest on short-term borrowings....................... 8,431 5,269 3,473 2,822
Interest on long-term debt.............................. 990 1,069 467 533
------------- ------------- ----------------- ------------
Total interest expense............................ 86,671 66,710 44,328 33,873
------------- ------------- ----------------- ------------
NET INTEREST INCOME..................................... 140,907 125,734 71,574 64,596
Provision for loan losses............................... 2,975 3,002 1,535 1,180
------------- ------------- ----------------- ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES .... 137,932 122,732 70,039 63,416
------------- ------------- ----------------- ------------
NONINTEREST INCOME
Trust division services................................. 21,548 21,859 10,806 11,248
Rental income........................................... 4,523 4,329 2,205 2,135
Service charges on deposit accounts..................... 7,831 7,759 3,923 3,964
Other fees.............................................. 9,827 9,806 5,311 5,042
Investment securities gains and (losses)................ (1,842) (186) (849) (235)
Other income............................................ 392 4,142 262 436
------------- ------------- ----------------- ------------
Total noninterest income.......................... 42,279 47,709 21,658 22,590
------------- ------------- ----------------- ------------
NONINTEREST EXPENSES
Salaries................................................ 46,839 42,853 24,713 22,017
Employee benefits....................................... 12,485 12,364 5,997 6,057
Net occupancy expense of bank premises.................. 8,818 9,057 4,465 4,459
Furniture and equipment expenses........................ 8,068 6,699 4,421 3,263
Communications and supplies............................. 4,805 4,748 2,373 2,436
FDIC insurance premium expense.......................... 5,471 5,462 2,734 2,731
Other expenses.......................................... 12,956 17,761 4,930 9,275
------------- ------------- ----------------- ------------
Total noninterest expenses........................ 99,442 98,944 49,633 50,238
------------- ------------- ----------------- ------------
Income before income taxes.............................. 80,769 71,497 42,064 35,768
Applicable income taxes................................. 30,447 27,681 15,950 13,770
------------- ------------- ----------------- ------------
NET INCOME ............................................ $ 50,322 $ 43,816 $26,114 $21,998
============= ============= ================= ============
NET INCOME PER SHARE OF COMMON STOCK (2) ............... $1.05 $.91 $.55 $.46
============= ============= ================= ============
See notes to consolidated financial statements
</TABLE>
PAGE 3
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
<CAPTION>
For the 6 Months Ended
Increase in cash and cash equivalents June 30,
(Dollars in thousands) 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fees on loans................................................................. $ 185,084 $ 145,425
Interest and dividends on investment securities............................................ 42,012 45,567
Other interest income...................................................................... 328 407
Noninterest income......................................................................... 44,916 48,184
Interest paid.............................................................................. (82,864) (67,033)
Noninterest expenses paid.................................................................. (88,922) (84,593)
Income taxes paid.......................................................................... (32,928) (29,756)
------------- ---------------
Net cash provided by operating activities............................................ 67,626 58,201
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities held-to-maturity......................... 88,375 144,694
Proceeds from sales of investment securities available-for-sale............................ 71,721 121,389
Proceeds from maturities of investment securities available-for-sale....................... 121,111 28,387
Purchases of investment securities held-to-maturity........................................ (36,339) (121,746)
Purchases of investment securities available-for-sale...................................... (82,593) (120,635)
Net increase in customer loans............................................................. (155,914) (45,068)
Capital expenditures....................................................................... (4,816) (3,838)
Proceeds from sales of other real estate owned............................................. 8,439
------------- ---------------
Net cash provided by investing activities............................................ 9,984 3,183
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in noninterest-bearing deposits.................................... (25,755) 22,473
Net decrease in NOW and savings accounts................................................... (165,012) (29,736)
Net increase in certificates of deposit.................................................... 313,144 31,841
Net decrease in short-term borrowings...................................................... (155,483) (11,531)
Repayment of long-term debt................................................................ (5,459) (433)
Proceeds from issuance of shares........................................................... 1,654 5,561
Repurchase of common shares................................................................ (14,990) (8,749)
Dividends paid............................................................................. (19,023) (15,997)
------------- ---------------
Net cash used in financing activities................................................ (70,924) (6,571)
------------- ---------------
Net increase in cash and cash equivalents.................................................. 6,686 54,813
Cash and cash equivalents at beginning of period........................................... 257,146 176,771
------------- ---------------
Cash and cash equivalents at end of period................................................. $ 263,832 $ 231,584
============= ===============
</TABLE>
<TABLE>
<CAPTION>
For the 6 Months Ended
Reconciliation of net income to net cash provided by operating activities June 30,
(Dollars in thousands) 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income................................................................................. $50,322 $43,816
------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................................ 3,804 3,676
Provision for loan losses................................................................ 2,975 3,002
Write-down of other real estate owned.................................................... 1,313 2,991
Investment securities (gains) and losses................................................. 1,842 186
Amortization of excess cost over equity in affiliates.................................... 565 565
Increase in interest receivable.......................................................... (154) (1,045)
Decrease in other receivables............................................................ 795 289
Decrease in other assets................................................................. 1,264 4,302
Increase (decrease) in interest payable.................................................. 3,807 (323)
Increase in accrued expenses............................................................. 3,574 2,817
Decrease in taxes payable................................................................ (2,481) (2,075)
------------- ---------------
Total adjustments.................................................................... 17,304 14,385
------------- ---------------
Net cash provided by operating activities.................................................. $67,626 $58,201
============= ===============
See notes to consolidated financial statements
</TABLE>
PAGE 4
MERCANTILE BANKSHARES CORPORATION
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Unrealized
Gains
Common Capital Retained (Losses) on
(Dollars in thousands, except per share data) Stock Surplus Earnings Securities
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993...................................... $96,470 $26,958 $551,513
Unrealized gains (losses) on securities at January 1, 1994...... $ 1,059
Net income...................................................... 43,816
Cash dividends paid:
Common stock ($.34 per share)................................. (15,600)
By affiliated bank prior to affiliation....................... (397)
Issuance of 58,079 shares for dividend
reinvestment and stock purchase plan.......................... 116 934
Issuance of 11,173 shares for employee stock purchase dividend
reinvestment plan............................................. 23 194
Issuance of 300,565 shares for employee stock option plan....... 601 3,693
Purchase of 441,000 shares under stock repurchase plan.......... (882) (7,867)
Change in unrealized gains (losses) on securities............... (3,377)
------------- ------------- ------------ ------------
BALANCE, June 30, 1994.......................................... $96,328 $23,912 $579,332 $(2,318)
============= ============= ============ ============
BALANCE, DECEMBER 31, 1994...................................... $96,228 $22,988 $606,972 $(2,271)
Net income...................................................... 50,322
Cash dividends paid:
Common stock ($.40 per share)................................. (19,023)
Issuance of 60,630 shares for dividend reinvestment and stock
purchase plan................................................. 121 1,173
Issuance of 3,795 shares under exercise of stock appreciation
rights........................................................ 8 76
Issuance of 12,822 shares for employee stock purchase dividend
reinvestment plan............................................. 26 250
Purchase of 706,264 shares under stock repurchase plan.......... (1,413) (13,577)
Change in unrealized gains (losses) on securities............... 4,165
------------- ------------- ------------ ------------
BALANCE, JUNE 30, 1995.......................................... $94,970 $10,910 $638,271 $ 1,894
============= ============= ============ ============
See notes to consolidated financial statements
</TABLE>
PAGE 5
MERCANTILE BANKSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) The statements include the accounts of the Corporation and all of its
affiliates, with all significant intercompany transactions eliminated, and
in the opinion of management, include all adjustments necessary for a fair
presentation of the results for the interim period. All such adjustments
are of a normal recurring nature. In view of the changing conditions in the
national economy, the effect of actions taken by regulatory authorities and
normal seasonal factors, the results for the interim period are not
necessarily indicative of annual performance. Previously reported average
loan balances have been reclassified to conform to the 1995 presentation.
2) Year to date per share amounts are based on the weighted average number of
common shares outstanding during the period of 47,770,693 shares for 1995
and 48,207,943 shares for 1994.
3) Amounts reported for 1994 have been restated to include the accounts of The
National Bank of Fredericksburg, Fredericksburg, Virginia, which became an
affiliate in November 1994. The affiliation was accounted for as a pooling
of interests. The accompanying statement of consolidated income for 1994
includes total income of $8,512,000 and net income of $1,243,000 for the
six months ended June 30, 1994, applicable to The National Bank of
Fredericksburg.
4) The Corporation adopted the provisions of Statements of Financial
Accounting Standards (SFAS) No. 114 and 118, Accounting by Creditors for
Impairment of a Loan on January 1, 1995. Under these standards, a loan is
considered impaired, based upon current information and events, if it is
probable that the Corporation will not collect all principal and interest
payments according to the contractual terms of the loan agreement.
Generally, a loan is considered impaired once either principal or interest
payments become 90 days past due at the end of a calendar quarter. A loan
may be considered impaired sooner if, in management's judgement, such
action is warranted. The impairment of a loan is measured based upon the
present value of expected future cash flows discounted at the loan's
effective interest rate, or the fair value of the collateral if the
repayment is expected to be provided predominantly by the underlying
collateral. Interest income on impaired loans is recognized on the cash
basis. A majority of the impaired loans at June 30, 1995 were measured by
reference to the fair value of the collateral. Information with respect to
impaired loans and the related valuation allowance (if the measure of the
impaired loan is less than the recorded investment) is shown below.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) JUNE 30, 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Impaired loans with a valuation allowance...................................................................... $ 6,178
Impaired loans with no valuation allowance..................................................................... $ 16,546
---------
Total Impaired Loans......................................................................................... $ 22,724
=========
Allowance for loan losses allocated to impaired loans.......................................................... $ 4,063
Unallocated allowance for loan losses.......................................................................... $ 85,484
---------
Total allowance for loan losses.............................................................................. $ 89,547
=========
Year-to-date interest income on impaired loans recorded on the cash basis...................................... $ 59
=========
Year-to-date average recorded investment in impaired loans during the period................................... $ 26,900
=========
Quarter-to-date interest income on impaired loans recorded on the cash basis................................... $ 30
=========
Quarter-to-date average recorded investment in impaired loans during the period................................ $ 25,500
=========
</TABLE>
NOTE: Impaired loans do not include large groups of smaller balance
homogeneous loans that are evaluated collectively for impairment (e.g.
residential mortgages and consumer installment loans). The allowance for loan
losses related to these loans is included in the unallocated allowance for loan
losses.
5) Various commitments to extend credit (lines of credit) are made in the
normal course of banking business. At June 30, 1995, total unused lines of
credit approximated $1,593,159,800. In addition, letters of credit are
issued for the benefit of customers by affiliated banks. Outstanding
letters of credit were $106,108,700 at June 30, 1995.
PAGE 6
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MERCANTILE BANKSHARES CORPORATION
EARNINGS SUMMARY
Net income for the second quarter of 1995 was $.55 per share, an increase of
20% over the $.46 per share for the comparable period last year. Consolidated
net income was $26,114,000, an increase of 19% over the $21,998,000 for the
second quarter of 1994. Amounts originally reported for 1994 have been
restated to include the accounts of The National Bank of Fredericksburg,
Fredericksburg, Virginia, which became an affiliate in November 1994. The
affiliation was accounted for as a pooling of interests.
Net income for the six months ended June 30, 1995 was $1.05 per share, an
increase of 15% over the $.91 per share earned in the same period in 1994.
Consolidated net income was $50,322,000, a 15% increase over the $43,816,000
for the first six months of 1994.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the three months ended June 30, 1995 was 11% higher
than the amount for the comparable period in 1994 due to an increase of 9% in
net interest margin on earning assets (taxable equivalent) and an increase of
2% in average earning assets. Contributing to the increase in net interest
margin were higher yields on average earning assets which were partially
offset by higher interest rates paid on interest-bearing funds and a shift in
the earning asset mix. Average loans increased by 9% over the second quarter
of 1994 to $4,070,400,000 for the second quarter of 1995. Average loans as a
percentage of average earning assets increased to 73% for the second quarter
of 1995, compared to 68% of average earning assets for the comparable period
in 1994. Meanwhile, average total investment securities declined to
$1,470,000,000, or 27% of average earning assets for the three months ended
June 30, 1995, from $1,713,100,000, or 32% of average earning assets for the
comparable period in 1994.
Net interest income for the six months ended June 30, 1995 was 12% higher
than the amount for the comparable period in 1994 due to an increase of 10% in
net interest margin on earning assets (taxable equivalent) and an increase of
2% in average earning assets. Contributing to the increase in net interest
margin were higher yields on average earning assets which were partially
offset by higher interest rates paid on interest-bearing funds and a shift in
the earning asset mix. Average loans increased by 8% over the first half of
1994 to $4,023,100,000 for the first half of 1995. Average loans as a
percentage of average earning assets increased to 72% for the first six months
of 1995, compared to 68% of average earning assets for the same period in
1994. Meanwhile, average total investment securities declined to
$1,529,300,000, or 28% of average earning assets for the six months ended June
30, 1995, from $1,726,100,000, or 32% of average earning assets for the
comparable period in 1994.
NONINTEREST INCOME
Total noninterest income for the quarter ended June 30, 1995 decreased 4% to
$21,658,000 from $22,590,000 for the second quarter of 1994 primarily because
of greater losses on investment securities and a 4% decline in trust fees for
the quarter.
For the first six months of 1995, total noninterest income decreased 11% to
$42,279,000 from $47,709,000 for the first half of 1994. Factors contributing
to this decline include a gain of $3,137,000 on the sale of an asset during
the first quarter of 1994 and $1,842,000 in losses on investment securities
during the first half of 1995 compared to $186,000 in losses on securities in
1994.
NONINTEREST EXPENSES
Total noninterest expenses, excluding the provision for loan losses, for the
second quarter of 1995 decreased 1% from the comparable period in 1994. Other
expenses for the second quarter of 1995 reflect a net recovery of foreclosed
property related expenses of $2,795,000 compared to a charge of $1,407,000 for
the second quarter of 1994. The net recovery is principally the result of the
sale of foreclosed property during the second quarter of 1995.
For the first half of 1995, total noninterest expenses, excluding the
provision for loan losses, increased 1% over the comparable period in 1994.
Other expenses for the first six months of 1995 also reflect the second
quarter sale of foreclosed property and include a net recovery of foreclosed
property related expenses of $2,019,000 compared to a charge of $3,222,000 for
the first six months of 1994.
ANALYSIS OF FINANCIAL CONDITION
Investment securities decreased 10% to $1,448,929,000 at June 30, 1995 from
$1,606,264,000 at December 31, 1994 in order to provide funding for loan
growth. Total loans outstanding increased by 4% to $4,086,722,000 at June 30,
1995 from $3,938,095,000 at December 31, 1994.
Total deposits increased 3% to $4,887,770,000 at June 30, 1995 from
$4,765,393,000 at December 31, 1994. However, noninterest-bearing deposits
declined 3% to $928,473,000 or 19% of total deposits at June 30, 1995 compared
to $954,228,000, or 20% of total deposits at December 31, 1994 while interest-
bearing deposits increased 4% to $3,959,257,000 or 81% of total deposits at
June 30, 1995 compared to $3,811,165,000, or 80% of total deposits at December
31, 1994. This shift in deposit mix is attributed to higher rates paid on time
deposits in the first half of 1995 compared to the rates paid at the end of
1994.
PAGE 7
ASSET QUALITY
NON-PERFORMING ASSETS
Non-performing asssets consist of non-accrual loans, renegotiated loans and
other real estate owned (i.e., real estate acquired in foreclosure or in lieu
of foreclosure). With respect to non-accrual loans, the Corporation's policy
is that regardless of the value of the underlying collateral and/or
guarantees, no interest is accrued on the entire balance once either principal
or interest payments on any loan become 90 days past due at the end of a
calendar quarter. All accrued and uncollected interest on such loans is
eliminated from the income statement and is recognized only as collected. A
loan may be put on non-accrual status sooner than this standard if, in
management's judgement, such action is warranted. During the six months ended
June 30, 1995, non-performing assets decreased $13,940,000 to $29,873,000.
Other real estate owned, one of the components of non-performing assets,
decreased $7,150,000 mainly due to sales of foreclosed properties while non-
performing loans, the other component, decreased $6,790,000.
PAGE 8
<TABLE>
Non-Performing Assets JUNE 30, December 31,
(Dollars in thousands) 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans (1)................................................................... $26,439 $33,645
Renegotiated loans (1).................................................................. 419 3
Loans contractually past due 90 days or more and still accruing interest................ NONE NONE
--------------- ---------------
Total non-performing loans.......................................................... 26,858 33,648
--------------- ---------------
Other real estate owned................................................................. 3,015 10,165
=============== ===============
Total non-performing assets......................................................... $29,873 $43,813
=============== ===============
</TABLE>
1) Total interest on these loans is not considered to be material in any of
the periods reported herein. Aggregate gross interest income of $1,311,000
and $3,230,000 for 1995 and 1994 respectively, on non-accrual and
renegotiated loans, would have been recorded if these loans had been
accruing on their original terms throughout the period or since origination
if held for part of the period. The amount of interest income on the non-
accrual and renegotiated loans that was recorded totalled $498,000 and
$1,524,000 for 1995 and 1994, respectively.
NOTE: As of June 30, 1995, the Corporation was monitoring loans estimated to
aggregate $3,458,000 not currently classified as non-accrual or renegotiated
loans. These loans have characteristics which indicate they may result in such
classification in the future.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Each affiliate is required to maintain an adequate allowance for loan losses
and their boards of directors, along with Corporate management, maintain a
regular overview to assure that adequacy. On a periodic basis, significant
credit exposures, non-accrual and other non-performing assets and various
statistical measurements of asset quality are examined to assure the adequacy
of the allowance for loan losses.
The following table presents a summary of the activity in the Allowance for
Loan Losses.
<TABLE>
<CAPTION>
For the 6 Months Ended For the 3 Months Ended
Allowance for Loan Losses June 30, June 30,
(Dollars in thousands) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance balance beginning............................ $ 91,257 $ 92,567 $ 92,738 $ 94,111
Charge-offs:
Commercial, financial and agricultural................ (3,781) (406) (3,610) (245)
Real estate construction............................. (109) (607) (109) (382)
Real estate mortgage................................. (1,049) (596) (889) (454)
Consumer.............................................. (885) (851) (470) (501)
------------- ------------- ----------------- ------------
Totals.............................................. (5,824) (2,460) (5,078) (1,582)
------------- ------------- ----------------- ------------
Recoveries:
Commercial, financial and agricultural................ 461 490 112 139
Real estate construction............................. 28 2
Real estate mortgage................................. 119 55 4 25
Consumer.............................................. 531 503 234 284
------------- ------------- ----------------- ------------
Totals.............................................. 1,139 1,048 352 448
------------- ------------- ----------------- ------------
Net charge-offs......................................... (4,685) ( 1,412) (4,726) (1,134)
Provision for loan losses............................... 2,975 3,002 1,535 1,180
------------- ------------- ----------------- ------------
Allowance balance ending............................... $ 89,547 $ 94,157 $ 89,547 $ 94,157
============= ============= ================= ============
Average loans outstanding during period................. $4,023,100 $3,709,500 $4,070,400 $3,729,900
============= ============= ================= ============
Net charge-offs (annualized) as a percentage of average
loans outstanding during period....................... .23% .08% .47% .12%
============= ============= ================= ============
Allowance for loan losses at period end as a percentage
of average loans...................................... 2.2% 2.5 % 2.2% 2.5 %
============= ============= ================= ============
Allowance for loan losses at period end as a percentage
of non-performing loans at period end................. 333.4% 175.0 %
============= =============
</TABLE>
CHARGE-OFFS
Intensive collection efforts continue after charge-off in order to maximize
the recovery of amounts previously charged off. Net charge-offs were
$4,685,000 for the first half of 1995 versus $1,412,000 during the first six
months of 1994. For further details of charge-offs and recoveries see the
preceding Allowance For Loan Losses table.
PAGE 9
MERCANTILE BANKSHARES CORPORATION
<TABLE>
ANALYSIS OF INTEREST RATES AND INTEREST DIFFERENTIALS
The following table presents the distribution of the average consolidated
balance sheets, interest income/expense and annualized yields earned and rates
paid through the first six months of the year.
<CAPTION>
1995 1994
-------------------------------------- -------------------------------------
Average Income*/ Yield*/ Average Income*/ Yield*/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans:
Commercial................................... $1,323,200 $ 64,149 9.8% $1,228,500 $ 46,701 7.7%
Mortgage and construction.................... 2,209,500 101,195 9.2 2,007,600 82,903 8.3
Consumer..................................... 490,400 22,874 9.4 473,400 19,690 8.4
------------- ------------ ------------ ------------
Total loans.............................. 4,023,100 188,218 9.4 3,709,500 149,294 8.1
------------- ------------ ------------ ------------
Federal funds sold............................. 10,800 319 6.0 13,500 252 3.8
Securities:
Taxable securities
U.S. Treasury securities................... 1,480,900 39,478 5.4 1,672,300 42,913 5.2
U.S. Agency securities..................... 25,900 684 5.3 29,200 776 5.4
Other stocks and bonds..................... 9,200 381 8.4 10,200 322 6.4
Tax-exempt securities
States and political subdivisions.......... 13,300 515 7.8 14,400 568 8.0
------------- ------------ ------------ ------------
Total securities......................... 1,529,300 41,058 5.4 1,726,100 44,579 5.2
------------- ------------ ------------ ------------
Interest-bearing deposits in other banks....... 100 2 4.0 600 24 8.1
------------- ------------ ------------ ------------
Total earning assets..................... 5,563,300 229,597 8.3 5,449,700 194,149 7.2
------------ ------------
Cash and due from banks.......................... 192,900 194,100
Bank premises and equipment, net................. 75,200 73,800
Other assets..................................... 142,700 146,900
Less: allowance for loan losses.................. (92,600) (93,800)
------------- ------------
Total assets............................. $5,881,500 $5,770,700
============= ============
Interest-bearing liabilities
Deposits:
Savings deposits............................. $2,216,500 33,457 3.0 $2,428,000 31,437 2.6
Time deposits................................ 1,652,500 43,793 5.3 1,363,500 28,935 4.3
------------- ------------ ------------ ------------
Total interest-bearing deposits.......... 3,869,000 77,250 4.0 3,791,500 60,372 3.2
Short-term borrowings.......................... 309,200 8,431 5.5 324,000 5,269 3.3
Long-term debt................................. 29,900 990 6.7 32,100 1,069 6.7
------------- ------------ ------------ ------------
Total interest-bearing funds............. 4,208,100 86,671 4.1 4,147,600 66,710 3.2
------------ ------------
Noninterest-bearing deposits..................... 867,400 876,700
Other liabilities and accrued expenses........... 67,400 55,700
------------- ------------
Total liabilities........................ 5,142,900 5,080,000
Stockholders' equity............................. 738,600 690,700
============= ============
Total liabilities and stockholders'
equity................................. $5,881,500 $5,770,700
============= ============
Net interest income.............................. $142,926 $127,439
============ ============
Net interest rate spread......................... 4.2 % 3.9 %
Effect of noninterest-bearing funds.............. 1.0 .8
------- -------
Net interest margin on earning assets............ 5.2 % 4.7 %
======= =======
Taxable-equivalent adjustment included in:
Loan income.................................. $ 1,790 $ 1,457
Investment securities income................. 229 248
------------ ------------
Total.................................... $ 2,019 $ 1,705
============ ============
*Presented on a tax equivalent basis using the statutory federal corporate
income tax rate of 35%.
</TABLE>
PAGE 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Description of matters voted upon and vote at Annual
Meeting of Shareholders held April 26, 1995.
Results on voting for Election of Directors:
DIRECTORS FOR WITHHELD
----------------- ---------------- -------------------
H. Furlong Baldwin 40,113,191 171,301
Thomas M. Bancroft, Jr. 40,104,095 180,397
Richard O. Berndt 39,792,621 491,871
James A. Block, M.D. 40,111,500 172,992
George L. Bunting, Jr. 40,120,532 163,960
Douglas W. Dodge 40,119,638 164,854
Edward K. Dunn, Jr. 40,117,693 166,799
B. Larry Jenkins 40,120,942 163,550
Robert D. Kunisch 40,113,701 170,791
William J. McCarthy 39,687,070 597,422
Morris W. Offit 40,057,251 227,241
Christian H. Poindexter 40,046,852 237,640
William C. Richardson 40,103,365 181,127
Bishop L. Robinson 40,081,498 202,994
Donald J. Shepard 40,120,380 164,112
Brian B. Topping 40,116,341 168,151
Calman J. Zamoiski, Jr. 40,116,979 167,513
Results on Voting on Ratification of Appointment of
Auditor (Coopers & Lybrand L.L.P.)
For Against Abstained
---------- ---------------- -------------------
40,067,863 97,296 119,333
There were no broker non-votes on these matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) No Forms 8-K filed.
PAGE 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
MERCANTILE BANKSHARES CORPORATION
August 14, 1995 /s/ H. Furlong Baldwin
By: H. Furlong Baldwin
Chairman of the Board and
Chief Executive Officer
August 14, 1995 /s/ Kenneth A. Bourne, Jr.
By: Kenneth A. Bourne, Jr.
Exec. Vice President and Treasurer
PAGE 12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MERCANTILE BANKSHARES CORPORATION JUNE 30, 1995 FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 226,607,000
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 37,125,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 1,214,673,000
<INVESTMENTS-MARKET> 234,256,000
<LOANS> 4,086,722,000
<ALLOWANCE> 89,547,000
<TOTAL-ASSETS> 5,929,304,000
<DEPOSITS> 4,887,770,000
<SHORT-TERM> 200,785,000
<LIABILITIES-OTHER> 68,693,000
<LONG-TERM> 26,011,000
<COMMON> 94,970,000
0
0
<OTHER-SE> 651,075,000
<TOTAL-LIABILITIES-AND-EQUITY> 5,929,304,000
<INTEREST-LOAN> 186,428,000
<INTEREST-INVEST> 40,829,000
<INTEREST-OTHER> 321,000
<INTEREST-TOTAL> 227,578,000
<INTEREST-DEPOSIT> 77,250,000
<INTEREST-EXPENSE> 86,671,000
<INTEREST-INCOME-NET> 140,907,000
<LOAN-LOSSES> 2,975,000
<SECURITIES-GAINS> (1,842,000)
<EXPENSE-OTHER> 99,442,000
<INCOME-PRETAX> 80,769,000
<INCOME-PRE-EXTRAORDINARY> 80,769,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,322,000
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 5.18
<LOANS-NON> 26,439,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 419,000
<LOANS-PROBLEM> 3,458,000
<ALLOWANCE-OPEN> 91,257,000
<CHARGE-OFFS> 5,824,000
<RECOVERIES> 1,139,000
<ALLOWANCE-CLOSE> 89,547,000
<ALLOWANCE-DOMESTIC> 89,547,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
